Search form

TRENDING:

House Dems reach deal on regulatory reform after threats by party centrists

House Democrats reached a deal on a thorny provision in financial
overhaul legislation that held up debate on Wednesday, Rep. Barney
Frank (D-Mass.) said.

Centrist Democrats, particularly the New Democrat coalition and Rep. Melissa Bean (D-Ill.), pushed strongly in support of an amendment that would expand the proposed Consumer Financial Protection Agency’s (CFPA) ability to override state regulations.

ADVERTISEMENT

The issue of federal preemption dominated most of the back-room discussions on Wednesday between congressional leaders and senior administration officials, including Neal Wolin, the second-ranking officer at Treasury.

Negotiators said they reached a middle ground on the
preemption issue, which will be inserted in the final revision, called a
"manager's amendment." In addition, New Dems say they've been
promised a floor vote on a centrist amendment loosening the rules on derivatives.

"It's neither no preemption or total preemption. It's
somewhere in the middle," said House Financial Services Chairman Barney
Frank (D-Mass.). "The differences have been narrowed and we're getting
something both sides can live with. I don't think it will be a significant
retreat."

The compromise came after hours of shuttle diplomacy in the
Capitol, according to an aide with knowledge of the circumstances. House
Majority Leader Steny Hoyer (D-Md.) the leadership liaison to centrists
shuttled back and forth between conference rooms in the speakers suites.

Bean who pushed to limit states
ability to write laws tougher than federal law, sat in one of the rooms. In the
other were Pelosi and Frank. After numerous trips back and forth, the often
volatile Frank, attributed Hoyer's patience to his Danish heritage.

"From now on only Scandinavians can do
negotiations," Frank quipped.

New Dems announced they were happy with the deal, contingent
on seeing the final language.

"This agreement will allow us to create an empowered
Consumer Financial Protection Agency that will place tough new federal
regulations on financial institutions from large banks to payday lenders to
mortgage brokers," Bean and New Dem Chairman Joe Crowley (D-N.Y.) said in
a joint statement.

Blue Dog Democrats were also supporting a separate amendment backed by Rep. Walt Minnick (D-Idaho) that would gut the CFPA and replace it with a council of existing regulators. Aides said the Minnick amendment would come up for debate in the full House.

“I don’t think frankly that has ever been as much of a bone of contention,” Frank said comparing Minnick’s amendment to the preemption issue. “Frankly I think that will be defeated if it comes up.”

New Democrats flexed their muscle all day on Wednesday, with aides saying that they would consider blocking floor consideration by voting against the “rule” that allows debate to begin. Rules reflect the wishes of House Speaker Nancy Pelosi (D-Calif.) and set out which amendments can be debated.

“New Democrats feel strongly about regulatory reform,” an aide to a New Dem lawmaker said earlier in the day. “They may consider a ‘no’ vote on the rule if they don’t consider it to be fair.”

House leaders had expected to begin debate on the regulatory bill in mid-afternoon, but the New Dem revolt caused the House to go into recess instead. They had expected to start with a vote on a separate rule allowing debate to begin. The recess indicates leaders were worried that enough centrists would vote against it to block the bill.

Republicans generally unite to vote against the Democrats’ rules. So it takes only 41 Democratic defections to block the bill. New Dems and House leaders negotiated even as Rules Committee members met on a separate rule that would determine which of 240 requested amendments they would allow.

The agreement was reached shortly after 6 p.m., allowing
debate to resume. The first of two rules was approved around 8 p.m. The real
test comes Thursday, after members have had a chance to review the language of
the rule and managers amendment.

The situation was unusual because it’s more common for Blue Dogs than New Dems to threaten to “take down the rule.” New Democrats generally pride themselves on getting their concerns addressed more quietly before they feel the need to issue threats.

Bean and New Democrats have been longstanding supporters of federal pre-emption, while Frank, more liberal Democrats and a wide array of consumer groups want to allow for greater state powers.

The Obama administration’s original proposal on financial regulation called for allowing states to pursue greater restrictions.

Some financial lobbying interests, including the Financial Services Roundtable, which represents large banks and financial institutions, are strongly in support of Minnick’s effort. But smaller banks, represented by the Independent Community Bankers of America (ICBA), were not making an all-out push for it.

Leading House Republicans said they did not expect any GOP members to support the bill on the floor.